Karachi: Pakistan devalued its currency on Friday for the fifth time this year as the nation negotiates a bailout with the International Monetary Fund.
The rupee fell 3.8 per cent to 139 per dollar at close from 133.9 on Thursday, paring losses after plummeting to as low as 143 in early trade. The rupee has erased more than a fifth of its value to become the worst performer in Asia this year, according to a basket of 13 currencies compiled by Bloomberg. Officials at the central bank declined to comment.
“There was a need for an adjustment,” Prime Minister Imran Khan said in Islamabad. “Large deficits are impacting the currency as foreign payments are causing a shortage of dollars.”
The devaluation comes after talks with the IMF for a bailout to bridge a $12 billion financing gap stalled without an agreement after Khan’s government said it wasn’t ready to accept some of the lender’s conditions attached to the rescue package. Pakistan’s Finance Minister Asad Umar told Bloomberg this week the $305 billion economy can afford a two-month delay as it looks for alternates to the IMF after receiving $1 billion from Saudi Arabia.
Pakistan’s currency, which is a managed by the central bank, is one of the reasons negotiations hit an impasse with the IMF, Abid Qaiyum Suleri, an economic adviser to the government, said in an interview last week. The IMF has long advocated Pakistan to loosen its grip on the rupee.
“The currency is managed by the central bank and it can’t manage the rupee artificially for a long time,” Umar said at a briefing in Islamabad on Friday.
Pakistan’s latest economic crisis emerged after the current account and budget deficits widened and the foreign reserves dropped to a four and a half year low.
“The currency adjustment is in line with our expectations of the need for a weaker rupee in the context of ongoing IMF negotiations,” said Bilal Khan, a senior economist at Standard Chartered Plc in Dubai.
The central bank’s Monetary Policy Committee will set the nation’s key interest rate later on Friday, with most economists expecting another hike of 100 basis points, according to a survey of 31 economist by Bloomberg.